Did Administration Officials’ Financial Entanglements with China Delay Trump’s Promised Tough-on-China Trade Policy?
Washington insiders and pundits are obsessed with an “ideological” battle over trade in the White House.
They argue that philosophical battle lines have been drawn between a pro-status-quo team led by exiting National Economic Council Director Gary Cohn and a trade-change team led by White House National Trade Council Director Peter Navarro and U.S. Trade Representative Robert Lighthizer.
But the lack of action on China trade in Trump’s first year and the internal administration trade fights over China trade policy align much more closely with Cabinet members’ and top advisors’ longstanding personal financial entanglements with the Chinese government and government-connected firms than fealty to a trade dogma.
Suspicions about how Jared Kushner may be using official meetings to help his family’s debt-ridden firm have made recent headlines. But less attention has been paid to how the widespread business connections – some ongoing – between Trump Cabinet officials and other senior staff and Chinese-government run or connected firms may have affected administration trade policies on China.
Notably, only on China trade were administration trade actions during Trump’s first year downright opposite of Trump’s campaign pledges and rhetoric. In every campaign speech, Trump promised Day-One action to declare China a currency manipulator. He railed against China in campaign speeches. An array of China trade actions was included in “Trump’s Contract With the American Voter.”But after abruptly reversing on the currency pledge, during its first year the administration did little to slow the flood of Chinese imports or boost U.S. exports there. Indeed, the China trade deficit in Trump’s first year grew relative to the end of the Obama administration.
Even Trump’s bellicose China trade rhetoric from the campaign was replaced by an uncharacteristically subdued tone. And during his November China state visit, Trump oozed praise for China and President Xi Jinping. Meanwhile, the U.S.-China Comprehensive Economic Dialogue (CED) accountability sessions were suspended. Rumors have raged since Thanksgiving that the administration would impose punitive measures against Chinese technology theft via a Section 301 investigation that the administration initiated in August. But time and again, action was delayed.
And, improbably, during Trump’s China visit, Commerce Secretary Wilbur Ross gleefully touted Goldman Sachs’ new $5 billion joint fund with the Chinese government’s main investment arm and plans by other state-owned and state-linked firms to buy assets in sensitive U.S. infrastructure, energy and food sectors. Such investments may be an aspect of the Chinese government “Made in China 2025” plan to dominate the global economy, but would seem antithetical to Trump’s promised “tough on China” agenda.
Meanwhile, during Trump’s first year in office the administration began to take action on other major trade issues spotlighted during the campaign. Trump put the final nail in the coffin for U.S. membership in the Trans-Pacific Partnership (TPP), announcing he would not move to enact it after the pact had failed to obtain majority support in Congress the previous year. The administration launched North American Free Trade Agreement (NAFTA) and Korea Free Trade Agreement renegotiations and demanded changes to the World Trade Organization’s (WTO) enforcement regime, blocking appointments to a key WTO panel. On NAFTA, USTR Lighthizer has moved to fundamentally reshape the pact, including with proposals that the corporate lobby opposes.
So, why has the China trade policy been so different? A review of the top-level staff of the Trump administration shows stark conflicts of interests not just relating to business in or with China, but with the Chinese government. Beyond President Trump himself, these deep ties and conflicts include:
- Previous or current ownership of shares in companies profiting from Chinese state-owned investment in the United States (Ross, Cohn, Treasury Secretary Steve Mnuchin, Kushner)
- Investments in companies doing business in China that may not have been divested at the time an official was engaged in policymaking that could impact his investments (Ross)
- Co-investments with Chinese state-owned investors that may not have been divested at the time an official was engaged in policymaking that could impact his investments (Ross)
- Previous direct ownership of stakes in Chinese state-owned companies (Cohn and outgoing Secretary of State Rex Tillerson)
- Ownership of businesses awaiting approvals for pending trademark applications in China (Ivanka Trump) and more.
This report provides a compilation of information that is available about these links; many investments might not be disclosed as they may be held in investment vehicles in which the underlying assets are not known. The imminent departures of Cohn and Tillerson will significantly diminish the top staff with past or current significant financial stakes in China and with Chinese government entities, although Ross remains. Will the change in personnel change the policy?
